In response to allegations by Hindenburg Research, Kotak Mahindra International Ltd (KMIL) has said that Hindenburg Research has never been a client or investor in its fund, K-India Opportunities Fund Ltd (KIOF).
“Kotak Mahindra International Limited (KMIL) and KIOF unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the Fund. The Fund was never aware that Hindenburg was a partner of any of its investors. KMIL has also received a confirmation and declaration from the Fund’s investor that its investments were made as a principal and not on behalf of any other person, a Kotak Mahindra Bank Ltd spokesperson said.
K- India Opportunities Fund Ltd (KIOF) is a SEBI registered Foreign Portfolio Investor and is regulated by the Financial Services Commission of Mauritius. “The Fund was established in 2013 to enable foreign clients to invest in India. The Fund follows due KYC procedures while onboarding clients and all its investments are made in accordance with all applicable laws. We have cooperated with regulators in relation to our operations and continue to do so,” the spokesperson added.
The issue
Hindenburg Research, a US-based short seller, disclosed that it generated $4.1 million in revenue from gains made by shorting Adani securities on behalf of its client. The firm said that this revenue largely offset the costs associated with producing its research, indicating minimal profit from its independent short positions.
The controversy arose following a show-cause notice issued by Sebi to the US-based short seller Hindenburg Research to disclose its financial dealings related to Adani securities.
Hindenburg Research alleged in an update on July 2 that Kotak Mahindra Bank and brokerage firms played a key role in creating and overseeing the offshore fund structure utilised by Hindenburg’s investor partner to short Adani stocks. Hindenburg questioned why the Securities and Exchange Board of India (Sebi) did not mention Kotak Bank in its findings.
“While SEBI seemingly tied itself in knots to claim jurisdiction over us, its notice conspicuously failed to name the party that has an actual tie to India: Kotak Bank, one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and oversaw the offshore fund structure used by our investor partner to bet against Adani. Instead, it simply named the K-India Opportunities fund and masked the ‘Kotak’ name with the acronym ‘KMIL’,” Hindenburg said.
